Strategic Report
8 Finsbury Food Group Annual Report & Accounts 2019
Business Model
Corporate Governance
Financial Statements
Creating Value Cost Effectiveness
• Centralised Group buying focused on high-quality and cost effective ingredients and efficiency of scale in the procurement of indirect items (e.g. personal protective equipment).
• Operational excellence initiatives focused on achieving lowest-cost-producer status in areas where we have niche strength e.g. artisan breads or round sharing cake.
• Our capital investment is focused on capability and cost reduction.
Value for Shareholders Using our Operating Principles achieves effectively our Purpose and Strategy, creating long-term shareholder value through share price growth and attractive dividends. Despite our achievements, the share price reduced from 117.5p at 30 June 2018 to 67.0p a year later. Over the year the dividend increased from 3.3p per share to 3.5p per share, a 6% increase. The ratio of enterprise value (EV) to adjusted EBITDA is 4.8x. Adjusted Group EBITDA is £25.5 million, consistent with the level achieved in 2018.
Bread and Cakes for Customers and Consumers Growth with Our Partners
• Our scale and diversity of products across UK bakery means the relationship with grocery retail customers is a partnership.
• Our business with discounters is growing in line with their growth within UK grocery.
• Our channel diversification into foodservice, our Kara foodservice brand, and our broad frozen foodservice range of products sees us as the leading foodservice partner to the industry growing at 5% in the year.
• We are growing with partners in the UK and across the rest of Europe in both bread and cakes.
• Our Lightbody Europe subsidiary in France and the Ultrapharm business in Poland gives a growing presence in Europe.
People Who Care
• A health and safety risk management team with their mantra of ‘Home Safe Every Day’ is, supported by resource and a common Group-wide strategy and programme.
• Values of teamwork, honesty, ownership, respect and communication: – New Workplace by Facebook communication tool to facilitate communication between all employees.
• A people strategy for all employees, embracing courses in basic English, an engineering apprenticeship programme, a graduate recruitment programme and leadership development programmes.
• Biennial employee survey to obtain our employees’ views.
We define ourselves as a speciality bakery group. Everything we do is with a view to achieving baking brilliance. We are predominantly a ‘retailer brand’ manufacturer, but target our product development at 'wowing' consumers, in line with emerging trends and shopping evolution. We constantly innovate and refresh our hot cross buns, artisan breads, celebration cakes, sharing cakes, Christmas yule logs, and our Kara range of foodservice bakery products. We are rapidly expanding our range of gluten-free products in both bread and morning goods and cake.
We measure success by the closeness of our long-term relationships with our retail and foodservice partners, by our growing presence in the discounter and convenience channel, and by the growth in our foodservice business, where we are one of the leading suppliers in bakery.
Our products reach a broader base of consumers through a strategy to diversify across all UK channels and European markets. Our customer base is broad, and having no single dependency lowers risk and creates value.
Employment and Development Opportunities for Individuals and Communities
People are important to our business. We have over 3,000 employees, ranging from unskilled, through semi-skilled, to management. Opportunities exist within all our bakeries for training and development programmes and talent management initiatives. We recognise potential and develop skills, facilitating personal development and advancement. Our 'People Who Care' Operating Principle, and initiatives that support it, reflects the importance of people to our business.
Tax Paid
Finsbury generates substantial tax for the country. Our employees pay tax on their earnings and the Company pays national insurance on those earnings. The Company pays Corporation Tax with an effective tax rate of circa 24.2% (French corporation tax rates 33% to 31 December 2018 reducing to 31% from 1 January 2019), as well as paying indirect taxes such as packaging, apprenticeship levies and in areas such as energy where there are significant government imposed renewable taxes. Our French and Polish-based subsidiaries pay similar taxes in their respective jurisdictions.
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